Worried about paying a clawback? If you received an Advance Premium Tax Credit to subsidize your health insurance in 2014, but then had an unexpectedly good year financially in 2014, you may be required to pay all or part of the credit you received. However, IRS has announced that it will waive penalties for late payment for taxpayers who are otherwise current on their taxes and who file their returns on time — either April 15th or in October after filing for an automatic extension. The waiver of penalties includes an extension of time to pay the clawback amount. Interest will still be charged, so it’s advisable to pay by April 15, 2015 if possible; but this may be welcome news for taxpayers who did not anticipate the impact of the clawback amount.
Here’s what the IRS says:
I had assumed, apparently too optimistically, that the major tax prep software programs would be able to easily handle the problem of reconciling the self-employed health insurance deduction (line 29 on form 1040) with the premium tax credit calculation (form 8962). After all, as complex as the IRS instructions may be, the actual calculation is simple math. IRS regulations have now given clear guidance, with two methods for calculation, and this should be a fairly easy task to integrate into the program software.
Unfortunately, this does not appear to be the case. I personally use H&R Block tax prep software and buy the “Premium” version which is advertised as best for self-employed. But when I experimented with the program, I found it didn’t seem to be making any reconciliation at all. Instead, the program was erroneously calculating the tax credit based on the MAGI with whatever value had been previously entered as the total self-employment premium, without making any adjustments as required by IRS.